Thee last part of the transport is not marginal in the real world. Increased local consumption drives transport, retail, marketing, etc. etc. Real life economic modeling is not a simple supply/demand, widgets made/sold chart.

The person pays for the good in US dollars. Where do those dollars go? The Chinese people who now have USD either spend or invest them back in the US.

Most of the dollars go as profit for the multi nationals. The remaining (very minimal) goes to the contract manufacturers.

Though thanks to the bigger market the prices can actually decrease, so living standards could increase, even if wages haven't.

Only if they wouldn't have bought it if they hadn't moved to the US.